Tempest at the Tea Company

Even at the eight-item counter, the Great Atlantic & Pacific Tea Company's 4,730 stores will be hard pressed to match President Byron Jay's own express checkout. Three weeks ago, only 13 months before reaching A. & P.'s mandatory retirement age of 65, Jay ended a 41-year, up-from-clerk career with the nation's biggest food chain by 1) chucking the $151,000-a-year job he had held since 1964 and 2) packing himself off to deep seclusion.

By last week, as some 500 of the company's 52,000 bewildered stockholders gathered for their annual meeting in Manhattan, A. & P. was in a first-rate tempest. With their stock crushed down from its 1961 peak of $70 (it closed last week at $26.75), A. & P. shareholders have long been restless over the company's declining (now 18%) share of grocery-chain sales. Last year its profit of $56 million (on sales of $5.4 billion) was off a bit from the previous year, despite Jay's robust prediction that earnings would be "running at a record pace."

Something Drastic. At the meeting, the company credibility gap was hardly improved when Chairman Melvin W. Alldredge insisted that the absent Jay had retired merely "because of personal reasons." With "such an aura of mystery," complained one disbelieving stockholder, "it must have been something fairly drastic." There were some rather drastic statistics to consider. During A. &P.'s first 1968 quarter, which closed just seven days before Jay exited, profits plummeted 21 % below the 1967 first quarter. Moreover, Alldredge conceded, there was no sign of "any significant change" ahead.

A. & P. stockholders had looked for quite a bit of change from Jay himself. A spare, cigar-smoking salesman, Jay took over an ailing company whose aging management--the three previous chiefs were 67, 68 and 66 when they took over--was losing ground to smaller chains. Jay moved A. & P. into long-term leases in suburban shopping centers and launched a sizable renovation and new construction program; he also tried to cut commodity costs with such facilities as the company's own recently opened, $25 million food-processing center in Horseheads, N.Y.

Costly Distinction. Such steps have yet to fatten A. &P.'s slim profit margin, which, at 1% of sales, is far narrower than the 1.5% achieved by Safeway, the second-biggest chain. Many stockholders, particularly heirs of Founder George Huntington Hartford, who started the chain 109 years ago, place much of the blame on a foundation set up by Hartford's sons, John A. and George L. Hartford, which holds the biggest single block (34%) of A. & P. stock. They maintain that the management-dominated foundation (eight of ten trustees are present or past A. & P. executives) in effect runs the company, placing the interests of top staffers ahead of stockholders'. Fearful of inquisitive bankers, goes one complaint, A. & P. has always shied away from loans and has financed improvements largely out of its own earnings. Manhattan Art Patron Huntington Hartford, one of the grandsons of the founder, charges that the foundation is responsible for a "lavish" pension plan (up to $50,000 a year for top officers) that costs an amount almost equal to 50% of A. & P. profits.

At the annual meeting, Chairman Alldredge snapped that such allegations are simply "not true." Relatively youthful (56) in A. & P. terms, Alldredge came up through storeside ranks, was named president in 1963, became chairman in 1966, and two weeks ago was given Jay's key title of chief executive officer. Parading a new management team, including fledgling President William J. Kane, 55, Alldredge promised "a fresh start" for A. & P.

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